strength beyond - sharedata · 2018. 8. 22. · strength beyond our existence established on the...

Integrated report 2018

ETHIOPIARWANDAZIMBABWEBOTSWANADRCSOUTH AFRICA ZIMBABWEBOTSWANADRCSOUTH AFRICA

Strength BEYOND

CONTENTS

2018 at a glance 11 Who we are3 About this report4 Beyond our business model6 Our outcomes8 Strategic goals10 Company structure12 PPC at a glance14 Beyond performance

Our business 1618 Chairman’s report20 Our view of the market22 Sustainable competitive advantage26 Risk management30 Stakeholder engagement34 Material matters

Strategic and operational review 3840 Chief executive officer’s report44 Operations review60 Environmental and energy review68 People overview78 HR training79 Social review80 Socio-economic development

Governance review 8688 Our leadership92 Corporate governance review100 Audit committee report102 Risk and compliance committee report104 Social, ethics and transformation report105 Remuneration report

Financial review 122124 Chief financial officer’s report132 Value added statement134 Seven-year review136 Independent auditor’s report137 Audited summarised consolidated financial statements 142 Segmental information144 Notes to the audited summarised consolidated financial

statements

Appendices 158158 Independent limited assurance report160 GRI index165 PPC Ltd shareholder analysis166 Financial calendar167 Corporate information167 Forward looking statement

How to read our integrated reportOur integrated report provides cross-references using these icons:

This icon refers the reader to further related information available within this report

This icon indicates additional information available on the group’s website www.ppc.co.za

Strength beyond–– It is the strength of our name and our promise to our customers, stakeholders,

staff and communities.–– It is the strength of our guarantee. The integrity placed behind every

purchase, every interaction; the knowledge that, when you buy PPC, you too place your trust and name on our word.

–– It is the strength of our purposeful and sustainable partnerships. Partnerships with like-minded organisations that will foster growth in our environment and help improve our societies.

–– It is the strength of our people to go beyond. Providing support beyond the ordinary and taking an active role in helping our stakeholders reach their full potential and transform their societies.

2018 AT A GLANCE

WHO WE ARE

Going Beyond

Our vision To be a company that provides world-class materials and solutions into the basic services sector, while creating sustainable value for all stakeholders.

What we do PPC is an iconic material and solutions provider of quality and consistent cement, aggregates, metallurgical-grade lime, burnt dolomite, limestone, readymix and fly ash. We also provide technical support to customers.

Our mission Our mission is to empower people to experience a better quality of life.

Leader in over 80% of the markets in which we operate

Number of employees + 3 500

Cement capacity 11,7mtpa in 2018

Cement plants 18

Lime factory 1 (1mtpa)

Readymix plants 25 (100 000m3 per month)

Aggregate quarries 4 (4mtpa)

Fly ash plant 1 (500ktpa)

Assets + R16 billion

Over US$750 million invested in the past four years

Revenue + R10 billion

Rest of Africa cement capacity 4,7mtpa

PPC Integrated report 2018 page 1

Strength beyond our existenceEstablished on the outskirts of Pretoria in 1892 as South Africa’s first cement plant, PPC’s story stretches back 126 years. Since the early gold-rush days, we have remained a resilient organisation that has adapted and flourished through changing economic and political circumstances, becoming a leading provider of quality building materials and solutions.

Throughout, we have focused on quality in everything that we do, growing into a business dedicated to perfecting the science behind producing cement, aggregates, lime, readymix and fly ash. A business that has built more bridges to connect communities, the buildings we call home and work across the continent; a business that has built world-class stadiums filled with home-grown and international fans; and a business that has improved lives and built schools to empower our communities and mould the minds of Africa’s future leaders.

This dedication at PPC is embedded into our core business because we believe that every one of us deserves to live and build better for now, tomorrow and for generations to come. This belief ties into our company purpose to empower people to experience a better quality of life.

We bring this purpose to life by delivering on our brand promise of Strength Beyond (set out on the contents page) in turn guided by our organisational values.

OUR VALUESPPC has refined its vision and strategy to ensure we are best positioned to capitalise on opportunities in our ever-changing landscape in our chosen markets.

OUR VISION To be a company that provides world-class materials and solutions into the basic services sector, while creating sustainable value for all stakeholders.

WHO WE ARE continued

ValuesPPC has realigned its organisational values to support its vision:

RE-PPC

We always do the right thing

We strive for

excellence in all

we do

Our people,

our strength

We arecustomer-

focused

We have passion

for winning

R E P P C

We hold each other

accountable and always act with integrity

We strive for excellence in all

we do

We value all our people and

recognise that each one of us is essential to our

success

We inspire each other with our

positive attitude and energy as we

strive to be the best

Our customers are at the heart of all we do and we exceed their

expectations every time


2018 AT A GLANCE

Disclosure covers all PPC’s:–– Cement manufacturing plants, milling

facilities and sales depots in the southern Africa segment (South Africa and Botswana) as well as the rest of Africa (Democratic Republic of the Congo (DRC), Ethiopia, Rwanda and Zimbabwe)

–– Manufacturing, blending and batching facilities, as well as aggregate quarries in the materials business (lime, readymix, aggregates and fly ash)

The preparation process for all our reports has been guided by the principles and requirements of International Financial Reporting Standards (IFRS), the International Integrated Reporting Council’s Framework (IIRC <IR> Framework), Global Reporting Initiative (GRI) Standards the King Code on Corporate Governance (King IV™*), the JSE Listings Requirements and the Companies Act 71 of 2008.

Our approach to materialityThis report provides information on all matters that we believe could substantively impact value creation for all stakeholders. To identify and prioritise material matters for inclusion in this report, we followed a structured process involving executive decision-makers, and a considered review of the group’s business model and operating environment. The outcomes were reviewed and signed off by the risk and compliance committee (report on page 102 ).

About this report

We welcome your feedback on our full suite of reports. This should be directed to Anashrin Pillay, group head of investor relations, tel +27(11) 386 9000 and email [email protected].

For further details on sustainability matters, please contact Tshilidzi Dlamini, general manager: group sustainability services, tel +27(11) 386 9122, and email [email protected].

Details for obtaining copies of the integrated report from the PPC company secretary are on the inside back cover.

REPORT PROFILEThis integrated report covers PPC’s financial and non-financial performance between 1 April 2017 and 31 March 2018. It follows a similar report produced for the financial period 1 April 2016 to 31 March 2017. The report is primarily intended for providers of capital, but we trust all stakeholders will find it informative. It should be read together with the supplementary information and audited annual financial statements on our website at www.ppc.co.za/investors/financials.

For details of our annual general meeting, refer to our notice of annual general meeting 2018 at www.ppc.co.za/investors/financials.

Board approvalThe board acknowledges its responsibility to ensure the integrity and transparency of the integrated report. Board members have applied their collective mind to the preparation of this report and believe it is presented in accordance with the IIRC Framework. The board believes this report addresses all material issues and presents a balanced and fair account of the group’s performance for the reporting period, as well as an accurate reflection of our core strategic commitments for the short, medium and long term.

The board has delegated responsibility for the integrity of the integrated report to the audit, risk and compliance committee, which recommended that the board approve this report.

Jabu MoleketiChairman

Johan ClaassenChief executive officer

12 July 2018

For the reporting period, our material matters at group level were (page 34):

1 Optimal capital structure

2 Liquidity

3 Compliance with the MPRDA

4 Financial disciplines

5 Reduced profitability

6 Human capital – talent development

7 Water

8 Corporate action

AssurancePPC complies with all relevant policies and procedures in preparing its annual financial statements. These were audited by Deloitte, whose unmodified report is on page 136 . Certain sustainability indicators were also assured by Deloitte (page 158 ). In addition, the audit committee provides internal assurance to the board annually on execution of the assurance plan. The committee’s report is on page 100 .

Supplementary informationIn addition to this integrated report, please see supplementary reports at www.ppc.co.za/investors/financials:–– Sustainability review –– Annual financial statements–– Summarised group results and notice of

annual general meeting 2018


BEYOND OUR BUSINESS MODEL

Our inputs

Human capital– Our people are our strength. Our processes ensure we invest in our people to meet

our strategic requirements. Their mobility enables them to serve the business in various geographies on the continent

– 3 538 employees– Training spend 2,5% of payroll

People

Financial capital– We actively manage funds

from shareholders and lenders to create value for all stakeholders

– Total assets R16,2 billion– Net group debt R4,7 billion– Cash and cash equivalents

R836 million– The focus for FY2018 was to

reduce the debt burden and improve liquidity

Prosperity

Intellectual capital– Our process and product

improvement and innovation drive helps us improve our environmental impact and reduce the cost of production

– Optimising IT processes to digitally transform the business

– Cement, aggregates, lime and fly ash products

Manufactured capital– We invest in construction and

maintaining infrastructure to improve efficiencies and reduce our emissions footprint. This requires significant financial, intellectual and human capital

– Invested in 18 cement plants, one lime factory, four aggregates quarries, 25 readymix plants and one fly ash plant

– New capacity (4,7 million tonnes of cement)

Natural capital– Our business depends on our ability to

preserve our planet by using natural resources responsibly

– Coal: 798 261 tonnes– Tyres: 4 324 tonnes

Communities/environment

Social and relationship capital– Building relationships with our stakeholders

and enabling economic progress in operating communities is key to our continued success

– Stakeholder engagements– CSI spend

AGGREGATES

LIME

FLY ASH

READYMIX

CEMENT


2018 AT A GLANCE

BEYOND OUR BUSINESS MODEL continued

Our outputs

Our outcomesare presented on the following page.

– 5,9mt cement produced– Reduced debt by

R1,0 billion– Gross profit of R2,3 billion

Prosperity

– LTI/LTIFR: 0,25– Training hours:

195 000 for the year

People

South Africa– Energy used: 14 733TJ– Water used: 2,8 million m3

– Emissions Dust: 744 tonnes NOx: 9 815 tonnes SO2: 685 tonnes

Communities/environment

Our process

GOVERNANCE

The board provides strategic direction, guidance and support, aided by directors’ cement, commercial and economic experience.

Board committees ensure that integrated thinking is embedded in strategic processes and decisions. The social, ethics and

transformation committee ensures that sustainability is interwoven with all decisions affecting our relationship with

communities and the environment.Our values have been revitalised by our people and leadership,

and communicated to all.

MATERIAL MATTERS

More on our material matters on page 34

FOH-FOur

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

Optimal capital structure

1

Liquidity

2

Compliance with the MPRDA

3

Financial disciplines

4

Reduced profitability

5

Human capital – talent development

6

Water

7

Corporate action

8


BEYOND OUR BUSINESS MODEL continuedOUR OUTCOMES

R330million

US$750million

R592million

R4,3billion

paid to lendersof capital

Procured

from preferentialsuppliers

paid to employeesin salaries, wagesand other benefits

We have invested over

in new capacity during the past four years

Paid taxes of

excellentprogress

R1 656million

25 000learners’ education from our CSI focus

in the last financial year

on environmental issues

Impacted

outcomesour

2018 AT A GLANCE

OUR OUTCOMES continued

R330million

US$750million

R592million

R4,3billion

paid to lendersof capital

Procured

from preferentialsuppliers

paid to employeesin salaries, wagesand other benefits

We have invested over

in new capacity during the past four years

Paid taxes of

excellentprogress

R1 656million

25 000learners’ education from our CSI focus

in the last financial year

on environmental issues

Impacted

outcomesour

Strategic GOALS

6 months 6 - 12 months 12 - 18 months

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

–– Optimal capital structure–– Free cash flow optimisation–– Process enablers (forecasting, systems, etc)–– Capital allocation priorities – VBM monitoring

F Financial

–– Defend our current position–– Optimise operations to full potential–– Grow in existing markets–– Manage from the centre

O Operations

–– Human resource solutions–– Talent management–– High performing organisation–– Organisational culture

H Human capital

FOH-FOUR long-term strategic priorities

CREATING SUSTAINABLE VALUE FOR ALL STAKEHOLDERS

In August 2017, we concentrated on getting back to basics and refocusing by introducing the FOH-FOUR strategic priorities: optimising the financial, operational and human capital of our group. We understand that addressing these priorities is our foundation for creating long-term sustainable value for all stakeholders in future.


2018 AT A GLANCE

GrowOptimiseDefend

Strategic GOALS continued

Long-term strategic priorities

Market leadership | FocusDefend markets we operate in

Relentless focus on performanceFunction at full potential

Route-to-market initiatives

Balanced portfolioDisciplined growth

Ambition

6 months 6 - 12 months 12 - 18 months

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS6 months 6 - 12 months 12 - 18 months

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

GROUP

FOH

OPTIMISATION

HUMAN CAPITAL

FINANCIAL

OPERATIONS

VALUE CREATION FOR ALL STAKEHOLDERS IN A TRANSFORMING SOCIETY

–– Cost of capital –– Cash flow return on investment

(CFROI)–– Balance sheet strength –– Liquidity –– Rating – investment grading–– Capital allocation

Financial–– Benchmark performance–– Execution of energy strategy–– Business performance–– Innovative culture –– Securing strategic materials –– Optimal sourcing –– Optimal asset utilisation

Operations–– Clear purpose –– Talent –– Alignment –– Inspiring climate –– Learning for growth–– Performance management–– Transformation agenda

Human capital–– Product–– Services–– Relationship –– Brand image

CUSTOMERS (VALUE PROPOSITION)

Our strategy was refined to focus on key elements of our business. We highlight some of the key focus areas under each strategic pillar.


Company structure

CIMERWA

51%

PPC South Africa Holdings

100%

PPC Lime

100%

PPC InternationalHoldings

100%

PPC Aggregates Botswana

100%

Habesha

38%

PPC Barnet DRC Holdings

69%

PPC Mozambique

100%

PPC Botswana

100%

Pronto Holdings

100%

3Q Mahuma Concrete

100%

PPC Zimbabwe

70%

PPC Aggregate Quarries

100%

Pronto Building Materials

100%

Ulula Ash

100%

PPC Group Services

100%

PPC Cement SA

100%

Safika Cement Holdings

95%

INTERNATIONAL

SOUTH AFRICA

We have designed our structure to support our strategy for sustainable business.


2018 AT A GLANCE

Cement process technology

About the lime business–– Iron and steel–– Environmental applications–– Chemical and others–– Non-ferrous metals–– Building materials–– RoadCrushing

limestone

2

Trucks carry limestone to the crusher where the energy source is electricity

34

Ground raw materials further blended to improve chemical consistency and fed to pre-heater of kiln system

Raw material homogenisation

Cooling

9

Cement mill

Cement storage

13

Cement despatch

14

Bags

15

Bulk

16

Blending of raw materialsRaw mill

Quarrying limestone

1

Limestone is loaded onto haul trucks. The loaders and trucks use diesel energy

Crushed limestone is stacked on blending beds

Depending on chemical composition, other materials such as shale, clay, sand, iron ore and boiler ash are added in the raw mill to

reach correct chemical composition for burning in the kiln

About 25% of total plant electrical energy is consumed in raw milling plant

Calcination and conversion of raw material to clinker

8

When materials are further heated to 1 450º C, clinker is formed. This falls

from the kiln into the cooler

Clinker storage

10

Gypsum feed

11

Grinding process carried out mainly in ball mills, accounting for 40% of total electrical energy consumption of the plant TO CUSTOMERS

12

Drilling and blasting Loading and haulingOverburden

Crushing and screening Stone fractions (sinter, FGD) Calcining

Burnt products (saleable) Screening (saleable)

Milling (saleable) Hydrating (saleable)

CapacityLime 990ktpa

Dolomite only LK9 330ktpa

Utilisation65%

5

Clinker is stored and then ground with gypsum and perhaps extenders such as fly ash, slag or limestone to

produce final cement products

Pre-heating

6 7

Coal millingFine coal burnt to drive off CO2 from limestone (mainly CaCO3), at approximately 850º C (calcination: most energy-intensive reaction in the clinker-making process)

Beyond PRODUCTION


PPC AT A GLANCE

Our countries of operation

East LondonPort Elizabeth

Johannesburg

Port Shepstone

Durban

Richards Bay

Cape Town

Saldanha

RiebeeckDe Hoek

LichtenburgeMalahleni

Polokwane

Newcastle

Gaborone

Botswana

W

S

D

W

S

D

Northern Cape

Eastern Cape

Free State

Ownership 69% Population (estimate) 79,8 million

Urbanisation 40%Forecast GDP growth (2018F – 2021F) 4,6%

Cement consumption per capita 32kgEmployees 140

See full DRC operational info on p54

DRC 1

Ownership 70% Population (estimate) 16 million



See full Zimbabwe operational info on p50

Zimbabwe 2




See full Botswana operational info on p48

Botswana 3



Cement consumption per capita 213kgEmployees 2 558

See full South Africa operational info on p46

South Africa 4

Revenue by segment (%)

54

26

20

● Southern Africa Cement ● Materials● Rest of Africa

Revenue by region (%)

74

26

● Southern Africa ● Rest of Africa

EBITDA by segment (%)

51

39

10

● Southern Africa Cement ● Materials● Rest of Africa

EBITDA by region (%)

61

39

● Southern Africa ● Rest of Africa

Sources: World Bank, July 2018 NKC Report, 2017

PPC has exposure to regions with solid economic fundamentals and is well positioned to take advantage of opportunities in emerging markets in Africa.


2018 AT A GLANCE

FOOTPRINT


Johannesburg

Port Shepstone

Durban

Richards Bay

Cape Town

Saldanha

RiebeeckDe Hoek


Polokwane

Newcastle

Gaborone

Botswana

W

S

D

W

S

D

Northern Cape

Eastern Cape

Free State

Ownership 3,8% Population (estimate) 101,7 millionUrbanisation 20%Forecast GDP growth (2018F – 2021F) 7,4%Cement consumption per capita 61kgEmployees 306See full Ethiopia operational info on p56

Ethiopia5


Johannesburg

Port Shepstone

Durban

Richards Bay

Cape Town

Saldanha

RiebeeckDe Hoek


Polokwane

Newcastle

Gaborone

Botswana

W

S

D

W

S

D

Northern Cape

Eastern Cape

Free State

1

23

4

5

6Ownership 51% Population (estimate) 11,9 millionUrbanisation 32%Forecast GDP growth (2018F – 2021F) 6,9%Cement consumption per capita 36kgEmployees 273See full Rwanda operational info on p52

Rwanda6

Map key

Current operation

Current operation and project

Recently commissioned

PPC grinding plant (4)

PPC mega-plant (3)

Grinding plant only

Western Cape

Slurry

Dwaalboom


Johannesburg

Port Shepstone

Durban

Richards Bay

Cape Town

Saldanha

RiebeeckDe Hoek


Polokwane

Newcastle

Gaborone

Botswana

W

S

D

W

S

D

Northern Cape

Eastern Cape

Free State


BEYOND PERFORMANCE

FINANCIAL STABILITY

Resilient performance

in a challenging environment

Portfolio effect bearing

fruit

Abnormal/non-recurring

items impacted

results

Board and management

changes

Key priorities to refocus financial,

operational and human capital

objectives

End of major capex

cycle

Completionof three major greenfield and

expansion projects

Successfully addressing

priorities underpins long-term value

for all stakeholders

1

2

3

4

5

8

7

6

keydevelopments

at ppc


2018 AT A GLANCE

BEYOND PERFORMANCE continued

Financial: affecting our financial performance 2018

Maintained southern Africa cement EBITDA margin at 22% in a tough environment

Basic earnings per share up 25% to 10 cents

Impairment of R165 million to DRC plant detracted from performance

Restructured DRC funding agreements, including two-year capital holiday

Implemented R2 billion debt-funding package in South Africa

Reduced capital expenditure by R1,1 billion

Launched R50/tonne profitability improvement strategy in SA

Implemented value-based management system

Net operating cash flow after investment activities improved by R1,8 billion

Group EBITDA excluding non-recurring costs up 2%, like-for-like up 4% and 17% higher than reported in the AFS

Group revenue increased 7% to R10,3 billion

Cash generated from operations after working capital up 23% to R2,3 billion

Group reported EBITDA declined 9% to R1,9 billion due to non-recurring costs and inclusion of DRC for the first time

Strong performance from rest of Africa cement operations, reflected in 14% EBITDA growth with DRC detracting from performance

Headline earnings per share increased 114% to 15 cents

Improved financial position: net debt down R900 million to R3,8 billion, net debt/EBITDA 2,0x Finance costs down

9%, like-for-like down 32%

CREATING VALUE

Manufactured Human NaturalSocial and relationship

Stakeholder

– Commissioned DRC and Ethiopian plants

– Group safety: lost-time injury frequency rate down from 0,40 to 0,25

– Energy management system introduced, encouraging initial results

– Dwaalboom plant compliance for emissions

– Announced BEE III transaction to comply with regulations and broaden shareholder base in South Africa



INITIATIVES

BEYONDTomorrow

Cost optimisation programme

You may expect one of the oldest cement plants in the country to be stuck in the past, but the PPC plant in De Hoek challenges this assumption. The plant has successfully demonstrated the viability of burning waste tyres as an alternative to coal for the purposes of cement production.

The project, which enables De Hoek’s kiln 6 to burn up to six tyres per minute, reduces the plant’s coal use by an estimated 10% while significantly

reducing nitrous oxide emissions. It simultaneously decreases landfill requirements for waste tyres, achieving a positive and sustainable environmental impact.

We are looking forward to implementing the same system at other PPC plants. In this way, we will be able to increase our green footprint both organically and sustainably. We also hope that by championing this initiative, we will inspire other

companies operating in the manufacturing space to explore similarly viable alternative energy solutions so that, as a sector, we are able to collectively reduce our environmental footprint.

A sustainable, new way of doing something that has been done for over 100 years is exactly the type of thing that PPC stands for.

For more on how PPC goes beyond: visit www.ppc.co.za/strength-beyond

Tyre-burning initiative

OUR BUSINESS


page 17

Project cost

Project start date

R35m

2016Location:

De Hoek, Piketberg, Cape Town

Total savings realised by the project:

10% of coal replacement

strength beyond - sharedata · 2018. 8. 22. · strength beyond our existence established on the...

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